The Job Of Creating Jobs

EditorialThe Hartford Courant

Gov. Dannel P. Malloy's economic development program is a valid topic for critical discussion, but not the way Tom Foley is doing it.

In a Jan. 2 press release, the Republican gubernatorial hopeful blasted the state Department of Economic and Community Development's Small Business Express program loan program, calling for a legislative investigation to ferret out "cronyism ... or gross incompetence" in the program. But his evidence for this insinuation is tissue-thin.

He has, not for the first time, trouble with his facts. He charged that two brothers who received state economic aid are "first cousins" of a Democratic lobbyist, Anthony Camilliere. But the brothers, Salvatore and Stephen Carrabba, are not related to Mr. Camilliere and say he didn't help them get state loans.

Mr. Foley also cited a loan to a company called the Green Garage Associates (it makes electric vehicle charging stations) and said it got money to fit out a floor of a building in Hartford but then moved to Tolland. But a company official said Monday that the company disclosed that it was moving to Tolland and didn't borrow money to fit out a floor in Hartford.

The main target of Mr. Foley's attack are two loans totaling more than $350,000 to Hartford insurance broker Earl O'Garro Jr., who is under state and federal investigation for a number of alleged irregularities and was arrested Monday on five counts of failure to pay wages.

In hindsight, the loans (one was from small business program, the other from another program) to Mr. O'Garro were ill-advised. But do they constitute a pattern of cronyism or incompetence? Based on Mr. Foley's evidence, no. Since the small business loan program began in 2012, the program has lent $130 million to 972 businesses, and only nine of them have closed.

Given the inherent risk in business loans, the small business program is doing pretty well. "We have a very disciplined process," said DECD Commissioner Catherine Smith in an interview last week.

Big Picture

Mr. Foley might be better served by a broader analysis of Mr. Malloy's approach to economic development. Here there are some pluses and some areas of concern.

Almost everything the state does, from education and arts to transportation and housing, is connected to economic development. Part of the challenge is to find the balance point between project-based economic assistance — grants, loans, etc. — and investment in the structural improvements that businesses need.

Subsidies are expensive. A series in The New York Times in December 2012 found that local and state governments across the country — many of them facing deficits — hand out at least $80.4 billion in business incentives ($860 million in Connecticut) each year to attract or retain corporations. Some of these subsidies pay off, but a lot of the money is wasted; subsidized plants and factories close or move anyway.

Easy Stuff

But the grants, loans and tax breaks are the easy part, said economist Fred V. Carstensen, director of the Connecticut Center of Economic Analysis. What businesses executives want, he said, are human capital and sound infrastructure.

One reason the state's job growth has been stagnant for more than two decades is that the state was complacent and let things slide. Railroad upgrades were put off. Technology transfer from state universities was almost nonexistent. Planning was hit or miss.

Things are changing. UConn under President Susan Herbst is aggressively looking to monetize its research. Gov. Malloy has taken a number of steps to increase jobs. Expanding the community college machinist training program to meet job demand made good sense. His "innovation ecosystem," just entering its second year, seems to be generating new businesses, often in the shared work spaces popping up around the state.

But many of Mr. Malloy's initiatives, such as his commitment to bioscience, are long-term in nature. The challenge is the short term, particularly in the large cities, where unemployment is the highest.

One answer would be to put city residents to work rebuilding highways, railroads, dikes, water systems, bike paths and airports.